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(b) Compute the expected opportunity loss value for each decision. EOL(Mega Centre) = EOL (New Stores) = EOL(Leasing) = (c) Select the best decision using EOL criterion. o Decision: Mega Centre Decision: New Stores Decision: Leasing (d) Which of the following formulae is correct? EVPI = max EMV EVPI = max EOL O EVPI = min EMV O EVPI = min EOL- The owner of the Party City Toronto Company must decide among building a mega centre store, building 5 new stores, or leasing 10 of their locations to another company. The profit that will result from each alternative will be determined by whether material costs remain stable, increase moderately, or increase significantly. The specialists calculated the likelihood for each possible level of material costs. In the payoff table below the estimated profitllosses are given in $thousands. Material Costs Moderate Increase Significant Increase Mega Centre 840 1000 1800 1040 -130 Leasing Probability of State 0 3 of Nature (a) Construct Opportunity Loss {Regret} Table. M aterial Costs \" Moderate Increase Significant In crease Probability of State of Nature (b) Compute the expected opportunity loss value for each decision. The owner of the Party City Toronto Company must decide among building a mega centre store, building 5 new stores, or leasing 10 of their locations to another company. The profit that will result from each alternative will be determined by whether material costs remain stable, increase moderately, or increase significantly. In the payoff table below the estimated profitsflosses are given in $thousands. Material Costs Moderate Significant Increase Increase Me ya 1810 -180 Centre 800 940 1030 _L Cl 03 C) (a) Construct Opportunity Loss {Regret} Table "'9' Centre ""' _ _ Stores (b) Determine the best decision using the Opportunity Loss decision criterion. ~ Decision: Leasing based on 3530 = max(1210,1450,3530) ~ Decision: Mega Centre based on 1210 = min{1210,1450,3530) ~ Decision: Leasing based on 4060 = min(1650,4060,1540} .. Decision: New Stores based on min = 90 The owner of the Humber Lakeshore Construction Company must decide among building a condo, constructing a shopping centre, or leasing all the company's equipment to another company. The profit that will result from each alternative will be determined by whether material costs remain stable, increase moderately, or increase significantly. The specialists calculated the likelihood for each possible level of material costs. In the payoff table below the estimated profitjlosses are given in $thousands. Material Costs Moderate Increase Significant Increase m 1840 1000 -160 ho in 3 pp 9 -2300 Centre Leasing 900 Probability of State of Nature a. Compute the expected monetary value for each decision: WW =:] b. Using Expected Monetary Value criterion, select the best decision. Select an answer c. Find the expected value with perfect information. d. Determine the expected value of perfect information. e. Please interpret EVPI. ~ EVPI is the minimum amount the company would pay for additional information ,. EVPI is the usual amount the company would pay for additional information ~ EVPI is the average amount the company would pay for additional information u EVPI is the maximum amount the company would pay for additional information
